Wisconsin's New Probate Code

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• Writing Wisconsin's New Probate Code

By Howard S. Erlanger

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The new Wisconsin Probate Code - effective Jan. 1, 1999¹ - is a comprehensive revision of the substantive law of probate, as contained in former chapters 851, 852, 853, and 861 of the code.²These chapters cover definitions and general provisions (chapter 851); intestacy (chapter 852); wills (chapter 853); and family rights (chapter 861). As part of the revision, new chapter 854 was created, which contains general rules applicable to all transfers at death.

A brief history of the new code

The last comprehensive revision of the substantive provisions of the probate code occurred in the late 1960s,³during the period that the original Uniform Probate Code (UPC) was being written and promulgated. The drafters of the 1969 Wisconsin Probate Code were in touch with the UPC drafters, and Wisconsin adopted many provisions that were similar or identical to those in the 1969 UPC. Wisconsin is not, however, considered to be a "UPC state." In the 1980s, a major revision of the UPC was undertaken by the Joint Editorial Board of the UPC, and a new UPC was promulgated by the National Conference of Commissioners of Uniform State Laws in 1990⁴ - creating the "1990 UPC."⁵ Because of the close ties between Wisconsin probate law and that of the UPC,⁶ in 1992 the State Bar Real Property, Probate, and Trust Law Section created a committee to study the UPC revisions, consult with practitioners, and recommend changes for Wisconsin.

The committee compared extant Wisconsin provisions to each UPC provision, proceeding from a presumption that the UPC should be considered to be the better rule of law. In the end, however, the committee determined that in some cases the Wisconsin provision should be retained, and in others that the new rule should be a modified version of the UPC provision. After more than five years of work, the committee - referred to in this article as the "Drafting Committee" - completed a proposal that was introduced in the Legislature in January 1998,⁷ passed in April, and signed into law in May 1998.

Although the new code is heavily influenced by the 1990 UPC, there are numerous and substantial differences; hence Wisconsin cannot be said to have adopted the UPC. The major themes orienting the committee's work were, however, in concert with those of the UPC:

• The Probate Code should focus on implementing the intent of the transferor;
• Probate rules should, whenever possible, provide uniformity and consider current public expectations;
• The rules relating to the distribution and interpretation of probate and nonprobate transfers should be similar;
• The Probate Code should consider the complexity of modern families; and
• The deferred marital property election should be simplified.

This article summarizes the major changes embraced in the new Probate Code, identifies potential problems with respect to retroactivity and federal preemption, and concludes with a word on how the new code might affect the everyday practice of trusts and estates in Wisconsin.

Focus on the transferor's intent

The Wisconsin Probate Code, like those of other states, is based on two important policies: 1) protection against fraud and coercion; and 2) implementation of the transferor's intent. In large part, these policies can be pursued together; for example, the formalities of will execution serve to protect against undue influence, and by so doing help guarantee that a will truly represents the testator's desires. Yet they also are in tension - if the law emphasizes protection through formalities, then some wills that genuinely reflect the testator's intent will not be admitted to probate, merely because they do not meet those formalities.

Even though there are strong arguments to be made in favor of the protective function of will formalities, to a great extent the public has rejected this function. Each year, more and more property is passed to survivors through nonprobate means: living trusts, life insurance and pension beneficiary designations, joint tenancy, survivorship marital property, joint and payable-on-death bank accounts, and the like. While all these nonprobate methods have some formalities, in virtually all cases there are substantially fewer than for wills. In addition, disputes regarding nonprobate transfers almost always focus on the substance of the transaction and the transferor's intent, rather than on whether formalities of transfer have been met.

The 1990 UPC dramatically reduces the formalities of will making, allowing, for example, any document to be admitted as the decedent's will - irrespective of compliance with any formalities - as long as there is clear and convincing evidence that the document was intended to be that person's will.⁸ The Drafting Committee concluded that the effect of so substantial a relaxation in will formalities was too uncertain, and opted instead to wait and see how those changes work out in other jurisdictions that have recently adopted them. The committee did, however, reduce some of the formality surrounding will execution:

• While under prior law two witnesses had to sign the will in the presence of the testator and in the presence of each other, the new code allows the witnesses to sign individually, within a reasonable time after witnessing either the testator's signing or his or her acknowledgment of the signature.⁹ Note that the purpose of the new provision is not to encourage sloppiness in the execution of wills; rather, it is assumed that careful practitioners will use the same formalities as before. However, the new rules will serve to make it somewhat easier to admit a will when the person executing the will was not aware of the formalities or was unable to comply with the strict witnessing requirement of the prior law.
• Under prior law, a witness (or his or her spouse) who also was a beneficiary under the will was absolutely barred from receiving an amount greater than that which would be received under intestacy - even if the witness's participation was innocent and there was no evidence of wrongdoing. Under the new code, this limit on the rights of "interested witnesses" is presumed to apply, but it is subject to rebuttal with evidence that the testator intended the witness to receive the full transfer.¹⁰

The new code also facilitates admission of wills by adopting an optional procedure to preclude a challenge based upon failure to comply with execution formalities. At the time of - or subsequent to - execution of the will, the testator and witnesses may execute an affidavit attesting that the formalities were complied with. This procedure, which is recognized in a majority of states, is determinative on questions of compliance with the formalities.¹¹

The Drafting Committee also decided that there was at least one type of transfer - that of individual items of tangible personal property - for which the formalities should be greatly reduced. Under the new code, a testator can indicate in the will that he or she might leave a separate written statement directing that various items of tangible personal property - for example, jewelry or heirlooms - be distributed to specified beneficiaries. This statement must be signed and dated, but it need not be witnessed, and it can be created or revised after the execution of the will.¹²This procedure "legalizes" what has been a common informal practice. However, drafters should remember that one advantage of the informal practice was that is was likely to be used only in situations where conflict regarding the items transferred was unlikely. Legalization of the procedure does not substantially change the risks associated with it.

Finally, the new code decreases the formality surrounding some aspects of will construction. Under the traditional law of wills, a will can be interpreted only using information contained "within the four corners of the document." The new code abrogates this rule as it applies to many issues of will construction, and generally allows admission of extrinsic evidence to prove intent in those instances. The code does not, however, adopt a general rule allowing reformation of errors in wills.

Provide uniformity and consider current public expectations

Over the past several decades, there have been successful innovations in the law of trusts and estates in other jurisdictions, and many worthwhile suggestions from commentators in scholarly journals. The UPC attempts to embody the best of these, and the Drafting Committee in turn adopted most of them. In considering whether to adopt a change, the committee was sensitive to the principle that, whenever possible, it is desirable that probate law be uniform across states. Uniformity will become more important as people become even more mobile; already it is not unusual for a person to have lived in several states, or to own real estate in more than one state. Changes that only affect wills or intestacy are discussed in the present section; changes that speak more to the unification of the law of probate and nonprobate transfers will be taken up in the following section.

With respect to intestacy, three noteworthy changes are made primarily for updating and uniformity:

• If there are no takers among the parents or the descendants of the parents, then more remote relatives (that is, the descendants of the grandparents - aunts, uncles, cousins) are split into maternal and paternal groups, with the takers in each determined separately.¹³ This contrasts with the "next-of-kin" approach taken in the former code.
• In a second departure from the next-of-kin approach, the rights of relatives to take under intestacy are now limited to the descendants of the grandparents; if there are none, then the intestate estate escheats to the state.¹⁴
• Finally, in unusual situations, a testator might want to provide that if the will should be inadequate and part or all of the estate should pass by intestacy, certain persons should be disinherited. The new code codifies this rule.¹⁵

The new code also makes a change that is "out of synch" with the UPC; it reverts to a rule of strict per stirpes for determining the rights of issue under intestacy.¹⁶

With respect to wills, changes primarily directed towards updating and uniformity include:¹⁷

• Clarification of the rights of the surviving spouse in situations where the decedent's will predates the marriage. Under the former code, marriage either had no effect on the will (if, for example, there was any provision for issue), or revoked the will in its entirety. Following the UPC, unless there is sufficient evidence that the omission from the will was intentional, the surviving spouse receives an intestate share in that portion of the estate not willed to issue.¹⁸
• Modification of the rights of children who were mistakenly omitted from the will.¹⁹ The new rules are partly based upon the UPC, but retain several features of prior law, including an expanded discretionary power in the court to determine the most likely intent of the testator and to modify the will accordingly.²⁰
• Clarification of what happens when a subsequent will or codicil does not obviously revoke the previous instrument, by creating rebuttable presumptions about the status of the previous will.²¹
• Clarification of the circumstances under which a previously revoked will can be "revived," by creating rebuttable presumptions about the testator's intent.²² The thrust of these provisions is to allow a prior will to be revived if that is the testator's intent.
• Codification of the doctrine of "incorporation by reference," which applies when a will seeks to include a separate document that does not itself meet the will execution requirements.²³

Integrate rules of probate and nonprobate transfers

The execution of wills is one area in which the UPC moved dramatically to integrate the rules relating to probate and nonprobate transfers. Nonetheless, as noted earlier, the Drafting Committee kept many of the formalities surrounding wills, in spite of the fact that most nonprobate transfers can be arranged much more informally.²⁴ But in other areas, the Drafting Committee thought it best to try to merge the law of probate transfers and nonprobate transfers.²⁵To a great extent this meant applying well-established probate "rules of construction" to the nonprobate arena, and in some cases resolving differences that existed in prior law between the law of intestacy and the law of wills. The new code includes an entirely new chapter, Chapter 854, that collects the new general rules applying to all transfers at death.²⁶ These include:

• Creation of a 120-hour (five day) survivorship requirement for all transfers that require the recipient to survive in order to take.²⁷Under prior law, there was a 72-hour survivorship requirement for intestacy, but survival by an instant sufficed for other transfers that required a person to survive.²⁸ In addition, beneficiaries under a revocable trust are now explicitly required to survive in order to take.²⁹
• Creation of definitions for three different modes of representation - [strict] per stirpes, modified per stirpes, and per capita at each generation - which apply when there is a provision for a person's issue, and two or more of the person's issue have predeceased.³⁰
• Extension of the "anti-lapse" rules, which apply when a named beneficiary has predeceased and no contingent beneficiary is named, from probate to nonprobate transfers.³¹
• Integration of the rules on the status of adopted persons.³² Under the prior law, there were differences between rules regarding transfers under intestacy and other transfers.
• Consolidation of the rules regarding the recipients of class gifts, and where necessary, extension to nonprobate transfers.³³
• Creation of a single disclaimer statute, replacing the two that existed under prior law, and reconciling variations between them.³⁴
• Creation of a single "slayer statute," reconciling six scattered statutes.³⁵
• Modification of the rules regarding the effect of divorce on the decedent's estate plan, and extension of these rules to nonprobate instruments.³⁶
• Extension of other probate rules to cover all nonprobate transfers, which primarily will be trusts. These include rules relating to: ademption - regarding what happens if a specific item is left someone, but the item is not owned at death;³⁷advancement - regarding the effect of lifetime gifts on transfers at death;³⁸ abatement - regarding the reduction of transfers when assets are insufficient to cover them;³⁹nonexoneration of liens on specific transfers;⁴⁰ and no-contest clauses.⁴¹

All these rules essentially serve as presumptions; they yield to evidence - including extrinsic evidence - of contrary intent. Some of the statutes require that this evidence relate to interpretation of words in the document, but other times the evidence can be completely extrinsic.

Consider the complexity of modern families

With the traditional family becoming increasingly less common, more attention must be paid to the effects on estate plans of divorce, remarriage, and the birth of nonmarital children. One troublesome occurrence is the failure for people to revise their estate plans after divorce. This usually means that both probate and nonprobate assets are designated to be paid to the former spouse, and sometimes to relatives of the former spouse.

Wisconsin, like other states, has long had a probate rule that a divorced spouse will be treated as having predeceased. However, the Wisconsin Supreme Court, like most other courts that have addressed the matter, has declined to extend this rule to nonprobate assets. The new code makes that extension, ⁴² and also revokes transfers to relatives of the former spouse who are not also relatives of the decedent. Thus, for example, it would revoke a transfer to a former stepchild, but not to children born or adopted in the former marriage. Of course, a person who wants a different result can provide for it in an estate plan made after the divorce; in addition, extrinsic evidence can be presented to rebut the presumption in the statute.

With respect to remarriage, the new code recognizes that some stepparents become very close to their spouse's children. Thus, it presumes that, subject to contrary evidence, if a person leaves property to a stepchild in the current marriage, and that stepchild predeceases, the property will go to the stepchild's descendants, if any. ⁴³ This is the same "antilapse" rule that applies to the decedent's own children.

With respect to nonmarital children, the new code cross references a recent statute that allows post-mortem paternity proceedings ⁴⁴ and recognizes paternity determined by courts in other jurisdictions. ⁴⁵

Finally, the "homestead protection" for the surviving spouse, which previously applied only in intestacy, has been expanded to allow the surviving spouse a "buy out" right in a home, if the home is part of the intestate estate or if there is a marital property component and the home is not specifically transferred to a third party. ⁴⁶

Simplify deferred marital property rights

Under Wisconsin's Marital Property Act, each spouse has a one-half interest in all property that is acquired during the marriage from income through work or investments. All property is presumed to be marital property unless a spouse can prove that it is not. But what of deferred marital property - that is, income earned (and the assets acquired therefrom) while the spouses were married but before the Act applied, either because they lived in a different state or lived in Wisconsin before the Act became effective in 1986? During the marriage, deferred marital property does not have to be shared. At death, the surviving spouse has elective rights to deferred marital property held by the decedent, in a nonreciprocal election; the decedent's estate has no similar rights in the deferred marital property held by the surviving spouse.

The prior code included separate elections for probate and nonprobate deferred marital property, with complex calculations for each. The new code, which is grounded in the UPC's elective share provisions, includes a single deferred marital property election that is simpler to use and that more closely tracks the partnership theory of marriage on which the Marital Property Act is based.

Under the new statute, the calculation of the election will in most cases be straightforward; the surviving spouse will be entitled to half the total value ofall deferred marital property in the marriage - including deferred marital property that he or she already owns. To the extent that the surviving spouse already owns deferred marital property, or receives propertyof any type from the decedent, the elective right will be reduced. For example, if the decedent spouse owned $50,000 of deferred marital property, and the surviving spouse owned $100,000 of deferred marital property, the elective right would be one-half of the total of $150,000, or $75,000. However, the election would be deemed satisfied by the $100,000 of deferred marital property already owned by the surviving spouse.

Applicability to preexisting instruments

The new code applies to revocable estate planning instruments existing on the effective date of the statute (Jan. 1, 1999), and to all instruments executed on or after that date.⁴⁷ The Drafting Committee deferred the effective date in order to allow practitioners to become familiar with the new law.

To the extent that the new code applies to instruments executed before its effective date, an argument can be made that it is inappropriately retroactive. With respect to nonprobate transfers, this argument has been made successfully in at least one federal appellate case under the Contracts Clause of the U.S. Constitution,Whirlpool Corp. v. Ritter, ⁴⁸ and at least one state supreme court case under the Contracts Clause of the Ohio Constitution. ⁴⁹ Each of these cases involved a life insurance policy that designated a former spouse as beneficiary and that was executed before the law was changed to revoke such designations at divorce. Both courts found the retroactive application of the statute to be unconstitutional.

The Joint Editorial Board for the Uniform Probate Code has issued a statement rebutting the Ritter court on the grounds that:

• Such statutes affect the donative transfer component, rather than the contractual component, of life insurance;
• The default rules contained in these statutes seek to implement, rather than defeat, the insured's expectations regarding the distribution of the policy proceeds; and
• There is no U.S. Supreme Court authority for applying the Contracts Clause to default rules.
• The Drafting Committee concluded that the UPC position is valid and should prevail in the courts.

Possible preemption by federal law

The Employee Retirement Income Security Act (ERISA) is a comprehensive act that essentially federalizes the law relating to pensions and employee benefits provided by most private employers. ERISA's preemption language is unusually broad; rather than being limited to state laws that conflict with specific ERISA provisions, the Act preempts any state laws that "relate to" employee benefit plans governed by ERISA. ⁵⁰ This broad language creates a risk that the courts will interpret ERISA as preempting state probate law, such as Chapters 854 and 861, insofar as it affects the beneficiaries of pensions and benefits, even though ERISA supplies no substantive regulation in this area.

Conclusion

The new code contains several provisions that will be important to estate planners, no matter what size estates they handle. Primary among these are the new definitions of the modes of representation, ⁵¹ the "separate statement" for transferring personal property, the affidavit of proper execution, and the new deferred marital property election.

Nonetheless, the primary purpose of the substantive part of the Probate Code is to be a stop gap; the code sets outdefault provisions to answer questions that primarily result from inadequate drafting or execution of documents. All estate planners agree that the intestacy rules have this character; we often tell clients that "you always have the estate plan the Legislature wrote for you." But virtually all the rules in Chapters 853 and 854 also are part of the Legislature's estate plan: They tell what happens if someone gets divorced and doesn't change their plan; if a beneficiary predeceases and no contingent beneficiary is named; if the drafter fails to specify the status of adopted or nonmarital issue; if no period of required survivorship is specified; and so on. The new code has more - and hopefully better - answers to these questions. But in spite of the tremendous effort that the Drafting Committee put into the creation of these chapters, it is everyone's fondest hope that they will seldom need to be used.

Endnotes

¹ 1997 Wis. Act. 188, § 233.

² Theprocedural law of probate is contained in chapters 856-860, 862-868, and 878-879. Chapters 880-882, which deal with guardianship, trust funds, and adult adoption, also are considered part of the Probate Code.Wis. Stat. § 851.002.

³See 1969 Wis. Act 339. The provisions of that act were generally effective on April 1, 1971.See former Wis. Stat. § 851.001 (1995-96).

⁴ The National Conference of Commissioners on Uniform State Laws (originally the Uniform Law Conference) was created in 1882. Wisconsin was an early participant, joining in 1893, and all states have participated since 1911. The most successful product of the Conference is the Uniform Commercial Code, but probate legislation has been a concern of the Conference from its earliest days. In 1970, after the first UPC was promulgated, a Joint Editorial Board for the UPC was established to monitor the states' experiences with the code and to develop proposals for its revision.

⁵ Fifteen states adopted enough of the 1969 UPC to be considered "UPC states." As of the NCCUSL annual meeting in August 1997, eight of these states and one new state had adopted enough of the 1990 UPC to be considered "1990 UPC states," while the remainder had not. ___ U.L.A. ___ (19xx).

⁶ In addition to the close connection in terms of legislative history, during the period in which the 1990 UPC was debated and adopted, two Wisconsin lawyers were deeply involved in the process: Lawrence Bugge of Madison was president of NCCUSL, and Jackson Bruce of Milwaukee was chair of the JEB.

⁷ 1997 AB 645.

⁸ UPC § 2-503. This provision is sometimes known as a "dispensing power" or a rule of "harmless error."

⁹ Wis. Stat. § 853.03(2). The new code retains the prohibition on holographic wills. In addition, a technical amendment may be necessary to fully implement the committee's intent with respect to this statute.

¹⁰Wis. Stat. § 853.07(2).

¹¹Wis. Stat. § 853.04. As noted, the procedure is optional. If there is no concern about a contest, a traditional attestation clause will do. However, the procedure may facilitate admission of the will in another jurisdiction.

¹² Wis. Stat. § 853.32(2). This provision was enacted separately in May 1996, but was substantially revised in the new code. The provision applies to wills executed on or after May 3, 1996.

¹³ Wis. Stat. § 852.01(1)(f).

¹⁴ Wis. Stat. §§ 852.01(1)(f) and (3). One consequence of this change is to reduce procedural problems when a person has a valid will but is survived by very distant relatives who are entitled to notice.

¹⁵ Wis. Stat. § 852.10.

¹⁶ Wis. Stat. § 852.01(1)(b), (d), (f). The former code used the rule of "modified per stirpes"; the UPC uses the rule of "per capita at each generation." These terms are defined at section 854.04.

¹⁷ Two other provisions that were motivated in part by a concern with uniformity and with conformity with the publics' expectations are (a) the affidavit for self-proving a will and (b) the separate statement for passing personal property. Both of these are discussed in the previous section.

¹⁸Wis. Stat. § 853.11(2). Note that this right is for a "pretermitted," that is, accidentally omitted, spouse. This situation is different from one where a spouse has been intentionally omitted; in that case the surviving spouse may qualify for the deferred marital property elective share.

¹⁹ Wis. Stat. § 853.25.

²⁰ Wis. Stat. § 853.25(5).

²¹Wis. Stat. § 853.11(1).

²²Wis. Stat. § 853.11(6)

²³ Wis. Stat. § 853.32(1).

²⁴ A simple example drives home the contrast. If a person's property is in a revocable trust, she can make changes in at-death dispositions by just writing out an amendment on a scrap of paper, with no formalities (other than any required by the trust instrument). However, if her property is owned outright, then will formalities are required.

²⁵ As trusts and other nonprobate transfers become increasingly common, the fact that there is nothing parallel to the "subsidiary law of wills" - a highly developed set of rules for dealing with common problems of construction and interpretation - is now recognized as a serious problem.

²⁶ One issue that arises when probate rules are extended to nonprobate transfers is the liability of third party stakeholders who may distribute property to the "wrong" beneficiary, and of the beneficiaries who receive property for which they are not eligible. In general, third parties acting in good faith are protected (Wis. Stat. §§ 854.23 and 854.24), and ineligible recipients are liable to the person entitled to the property under the statute (Wis. Stat. § 854.25).

²⁷Wis. Stat. § 854.03. This codifies a common drafting practice, although drafters usually use a longer period.

²⁸ These transfers were governed by the Uniform Simultaneous Death Act, which has been repealed as unnecessary.

²⁹Wis. Stat. § 701.115.

³⁰Wis. Stat. § 854.04.

³¹ Wis. Stat. § 854.06.

³² Wis. Stat. §§ 854.20 and 854.21(1).

³³ Wis. Stat. §§ 854.21 and854.22 .

³⁴ Wis. Stat. § 854.13. Note that under a statute enacted in 1996, joint tenancies may now be disclaimed under state law.

³⁵ Wis. Stat. § 854.14.

³⁶ Wis. Stat. § 854.15. These changes are discussed in the following section.

³⁷ Wis. Stat. § 854.08.

³⁸ Wis. Stat. § 854.09.

³⁹ Wis. Stat. § 854.18.

⁴⁰ Wis. Stat. § 854.05.

⁴¹ Wis. Stat. § 854.19.

⁴² Wis. Stat. § 854.15.

⁴³ Wis. Stat. § 854.06(2)(b).

⁴⁴ Wis. Stat. § 852.05(4).

⁴⁵ Wis. Stat. §§ 852.05(1) and (2).

⁴⁶ Wis. Stat. § 861.21.

⁴⁷ 1997 Wis. Act. 188 § 233.

⁴⁸ Whirlpool Corp. v. Ritter, 929 F.2d 1318 (8th Cir. 1991).

⁴⁹ Aetna Life Ins. Co., v. Schilling, 616 N.E.2d 893 (Ohio 1993).

⁵⁰ Section 514(a) of ERISA provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" that ERISA governs. See 29 U.S.C. § 1144(a).

⁵¹ For example, under prior law, there was no definition of the term "by representation" except for intestacy and for the Basic Wills - and those definitions were contradictory.

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